Understanding Share of Wallet in the Context of Supermarkets

Share of wallet is often seen as a useful metric because it reflects the proportion of a customer’s grocery spend allocated to a particular supermarket compared to others. For example, if a customer spends £50 a week on groceries and £20 of that is spent at Tesco, then Tesco’s share of wallet for that customer is 40%. The assumption is that the higher the share of wallet, the more loyal the customer is to that supermarket.

In a supermarket context, share of wallet can be an important indicator of retention—a customer who consistently shops at the same supermarket, even if they occasionally visit competitors, is likely to be a repeat buyer. However, this metric has its limitations when used as a sole indicator of loyalty, especially in the diverse and often price-sensitive UK supermarket market. UK consumers are known for their tendency to shop across multiple stores, driven by a variety of factors such as price comparisons, product selection, and convenience. As such, customers may remain loyal to a supermarket for specific categories, like fresh produce or branded goods, but still use other stores for budget-friendly items or promotions.

The Multi-Store Shopping Behaviour of UK Consumers

One of the challenges with using share of wallet as a measure of loyalty in UK supermarkets is the prevalence of multi-store shopping. According to research, many UK consumers regularly shop at more than one supermarket to get the best deals on different products. For example, they might visit Aldi or Lidl for low-cost essentials and then head to Waitrose or Sainsbury’s for premium or organic items. This type of shopping behaviour is common among UK shoppers, especially given the wide variety of supermarkets offering distinct value propositions.

This behaviour means that even if a customer’s share of wallet at one supermarket is high, it doesn’t necessarily reflect deep loyalty. Instead, it could be a reflection of the customer’s shopping habits, which are influenced by a complex mix of convenience, promotions, product offerings, and price. A customer might spend a significant amount at a supermarket but still be open to shopping at competitors for specific items or special deals. This makes share of wallet a less reliable measure of true loyalty, especially when compared to other metrics that consider broader factors like emotional connection, satisfaction, and brand affinity.

Emotional Loyalty vs. Transactional Loyalty

True loyalty, particularly in the supermarket industry, is often a combination of both transactional loyalty (driven by repeat purchases) and emotional loyalty (driven by a strong bond with the brand). Share of wallet primarily captures the transactional aspect, but it misses the emotional component. For example, a customer may always shop at Tesco for their weekly groceries because it’s convenient, but they might prefer the customer service or unique offerings at Marks & Spencer when it comes to special occasions or premium items. Emotional loyalty is about brand attachment—something that share of wallet can’t always reflect.

To fully understand loyalty, supermarkets need to look at a combination of metrics, such as customer satisfaction, net promoter score (NPS), and frequency of purchase. These metrics go beyond mere spending patterns to capture the deeper, emotional connection customers have with a brand. A customer might be spending more at one store than others, but if their satisfaction with the store is low or they don’t feel an emotional connection, their loyalty may not be as strong as share of wallet suggests.

Other Metrics to Consider

To get a clearer picture of customer loyalty, supermarkets should consider supplementing share of wallet with other loyalty metrics such as customer lifetime value (CLV), frequency of visits, and churn rates. For instance, if a customer’s frequency of visits decreases over time, even if their share of wallet remains high, this could indicate a potential for churn. Additionally, customer feedback and reviews—whether collected via surveys, loyalty programs, or social media—can provide a more comprehensive understanding of what drives customer loyalty. Supermarkets that actively engage with customers through loyalty schemes, personalized offers, and community-building initiatives often have a better chance of fostering true loyalty.

Conclusion: Is Share of Wallet the Best Indicator of Loyalty?

While share of wallet can offer insights into a customer’s purchasing habits, it doesn’t always capture the full picture of loyalty in the UK supermarket market. Given the prevalence of multi-store shopping and the complexity of consumer behaviour, share of wallet alone may not reflect a customer’s emotional attachment to a supermarket or their long-term brand loyalty. Supermarkets need to consider a range of metrics—transactional and emotional—when evaluating loyalty, including customer satisfaction, engagement, and overall brand affinity. By using a more holistic approach to measuring loyalty, supermarkets can better understand customer behaviour and cultivate deeper, more lasting relationships with their shoppers.